Chapter 10 - § 10.3 • ENVIRONMENTAL IMPAIRMENT AND SPECIALIZED ENVIRONMENTAL LIABILITY INSURANCE

• Jurisdiction: Colorado

§ 10.3 • ENVIRONMENTAL IMPAIRMENT AND SPECIALIZED ENVIRONMENTAL LIABILITY INSURANCE

The scope of this chapter is necessarily narrow, and the primary focus has been upon "occurrence" as opposed to "claims made" policies, as most of the litigation to date has centered upon these policies in an environmental context. Counsel should also be aware of "environmental impairment" policies, a breed of insurance devised by the insurance industry in an effort to avoid the potential difficulties in amending existing CGL policies, and thereby arguably impliedly admitting that the earlier policies were not clear and unambiguous from the beginning. Environmental impairment insurance is invariably written on a "claims made" basis, and commonly covers liability under federal and state law that seeks to impose "legal liability" on insureds for damages arising from pollution-causing activities. Coverage terms and conditions vary markedly, as each insurer seeks to design a policy specifically tailored to its policyholder's needs, or at least categories of similar policyholders. While all policies predictably cover liability for cleanups, defense costs may not necessarily be included, as well as liability stemming from nuclear materials, workers' compensation claims, and fines and penalties imposed by law. Further, premiums for environmental impairment insurance are often cost-prohibitive, and in many instances, coverage is unavailable for the environmental risk to be underwritten.

As a result of the plethora of litigation surrounding the issues of coverage under CGL liability policies for environmental damage claims, the insurance industry has responded with various new coverage forms. For example, it was not unusual for affected businesses, ranging from multi-national conglomerates to major manufacturers to producers of goods and services, to shop the international insurance marketplace annually, negotiating the best premiums for coverage of their activities and products, potentially exposing this class of policyholders to liability for environmental damage claims. Of necessity, the myriad carriers "on the risk" for a particular policyholder's activities would vary from year to year. In the context of claims arising from environmental harms, a policyholder's exposure may occur during the period the policyholder's coverage was in effect, continuing thereafter over several years of coverage under different carriers, but not manifesting itself in tangible damage forms until...